Banks face rebellion

CUSTOMERS are lining up to support an unprecedented legal battle against the big High Street banks. The action aims to speed up cheque clearance and the time it takes for interest to be paid on credit balances.

It takes up to ten working days after a cheque is paid into an account before the customer has access to the cash. It can also take five days for banks to credit interest on money paid into accounts by cheque. The banks make big profits out of both delays.

Since Financial Mail alerted readers to the issue last week, hundreds have written to us or contacted www.thisismoney.co.uk, to voice their anger and pledge support.

Retired lawyer John Tees-Hillman has joined forces with the National Association of Bank & Insurance Customers (NABIC) to put together a fighting fund for the unprecedented joint action.

Tees-Hillman, of Lymington, Hampshire, hopes to collect names and contributions from 500 people to start the process. He says: 'I know from working with merchant banks that customers' money held back in these sorts of delays is being lent on the international money market at huge profit.

'The banks need to be brought to heel over this. If we beat one for treating customers unfairly, the rest will fall.'

NABIC calculates that the banks make about £20 million a year by holding on to customers' money for excessive periods and investing it themselves in the meantime.

One Financial Mail reader, Colin Swain, is angry about the way that banks treat customers because he knows from experience that they could change their ways immediately.

Colin, 54, from St Neots, Cambridgeshire, says: 'I am a former bank manager and as far back as 1988 I was able to take the decision to allow same day clearance, normally for cheques drawn against salary or insurance claims.

'The ability to make these decisions has now been taken away from most bank branches and I am horrified that customers sometimes have to wait up to ten days to access their money.'

Four weeks ago, Colin received a cheque for £135 from his medical insurer.

With payday seven days away, he paid in the cheque immediately, but was told that he would have to wait five days to access his money. Colin says: 'Things have gone backwards through greed. I wholeheartedly support the campaign to persuade banks to clear funds in reasonable time.'

One reader supporting the legal action says he had to wait an incredible six weeks for his bank to clear a cheque issued by the Canadian government - a source that would be unlikely to issue a dud cheque. But the battle may be hard-fought. Banks have refused to act on the issue so far, despite criticism from the likes of a Treasury Select Committee.

The committee asked for, and failed to find, any evidence that the banks were trying to tackle the problem. Yet there are no physical or technological reasons for the delays.

The Association for Payment Clearing Services says that all cheques are cleared through its systems in three working days and the technology exists for banks to clear cheques within 24 hours - if they were prepared to invest in it.

But only one High Street bank, Barclays, routinely gives its customers instant clearing on cheques. HSBC, NatWest/Royal Bank of Scotland and Halifax clear in three days, while Britannia building society is one of the industry's laggards, taking 10 days.

The worst offenders for being slow to credit interest on money paid in by cheque include Alliance & Leicester, Woolwich and Lloyds TSB, which force customers to wait up to five days on many accounts.

To sign up for Financial Mail and www.thisismoney.co.uk's campaign, email editor@thisismoney.co.uk.